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14th Edition

William J. Baumol + 2 others

Publisher: Cengage Learning

ISBN: 9781337794992

Chapter 7, Problem 1TY

Textbook Problem

A firm’s total fixed cost is $360,000. Construct a table of its total and average fixed costs for output levels varying from zero to six units. Draw the corresponding TFC and AFC curves.

Expert Solution

To determine

**To find: **The table showing TFC and AFC and the curve of these costs.

Below is the complete table. Here, the average fixed cost is calculated by dividing the total fixed cost by outputs.

Output | Total Fixed cost (fig. in thousands) | AFC (fig. in thousands) |

0 | 360 | 0 |

1 | 360 | 360 |

2 | 360 | 180 |

3 | 360 | 120 |

4 | 360 | 90 |

5 | 360 | 72 |

6 | 360 | 60 |

Below is the curve that shows the total fixed cost curve and the average fixed cost curve. Here, the horizontal axis shows the output. While the vertical axis shows the price or costs.

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